RE: Illegal Rationing of US Silver Eagles

(Bix Weir nails it!)

Silver Stock Report

by Jason Hommel, May 19th, 2008

I received an excellent
letter this morning from Bix Weir, that quotes the law that shows the
current rationing of Silver Eagles is illegal.If you are confused
about why rationing should be against the law and how it causes
silver prices to be lower than the market price would otherwise be, I
suggest you re-read my article on Rationing of Silver Eagles:http://www.silverstockreport.com/2008/rationing.html

(e) Notwithstanding any other provision of law, the Secretary shall
mint and issue, in quantities sufficient to meet public
demand, coins which--

(1) are 40.6 millimeters in
diameter and weigh 31.103
grams; (2) contain .999 fine
silver; (3) have a
design--
(A) symbolic of Liberty on the obverse side;
and
(B) of an eagle on the reverse
side; (4) have inscriptions
of the year of minting or issuance, and the words ``Liberty'', ``In God We
Trust'',
``United States of
America'', ``1 Oz. Fine Silver'', ``E Pluribus Unum'', and ``One Dollar'';
and (5) have reeded
edges.

(f) Silver Coins.—

(1) Sale price.--The
Secretary shall sell the coins minted under subsection (e) to the public
at a price equal to the market value of
the
bullion at the time of sale, plus the cost of minting, marketing, and
distributing such coins (including labor, materials, dies, use
of
machinery, and promotional and overhead
expenses). (2)
Bulk sales.--The Secretary shall make bulk sales of the coins
minted under subsection (e) at a reasonable
discount. (3)
Numismatic items.--For purposes of section 5132(a)(1) of this title, all
coins minted under subsection (e) shall be considered to
be
numismatic items."

The law is clear that the silver coins must be supplied to the US
public in "quantities sufficient to meet public demand"
EVEN IF it means the US Mint drives up the price of silver bullion on the
open market in order to obtain the silver needed to produce the US Silver
Eagles. That rise in price should, theoretically, decrease the current
voracious demand for US Silver Eagles and allow for the true price
discovery of silver bullion. That's how our freely traded markets are
supposed to function in order to determine the “fair market value” of any
asset.

Unfortunately, the rationing of Silver Eagle coins greatly distort the
fair market value of both the coins as well as the silver bullion used to
make them. By rationing the coins, the US Treasury and US Mint are
artificially suppressing the demand for silver bullion thus creating
artificial downward pricing pressure on silver. The size of this
artificial price/demand loss is unknown BUT given that the 1oz US Silver
Eagle is by far the most popular silver coin in the world, I would suggest
that the artificial suppression is significant. For example, when the
Silver Eagle rationing program started in mid-March 2008, the price of
silver bullion immediately dropped from $21/oz to $17/oz thus trimming 20%
off its fair market value in only 4 days. Clearly the fair market value is
being artificially distorted. As stated in section (f) above, the public
is entitled to purchase US Silver Eagle coins at the "market value of
[silver] bullion" plus costs associated with production. Currently, that
is not the case. I expect you to end the rationing program immediately and
fulfill your legal obligation to the people of the United States of
America.

The US Mint is not sanctioned to be a market maker or market manager in
precious metals. The Mint is, by law, the facilitator of US Silver Eagle
supply and that supply is legally designated to be limited only by the
willingness of the purchaser to buy. If the Mint receives an order for 10M
ounces or 20M ounces or even more it is 100% legally obligated to
immediately supply those Silver Eagles from inventory or enter into the
physical silver market and purchase the silver bullion and process it.
What effect that purchase has on the price of silver bullion should not be
of consequence to the Mint since the price is passed on to the purchaser
(plus fabrication).

Luckily, for the stability of the silver market, the CFTC has assured
the world that there is no silver price manipulation and that there is
currently (and apparently always will be) an adequate supply of physical
silver to cover any demand that surfaces.

I would also like to point out that the US Silver coin has always had
tremendous historical and monetary significance to the citizens of the
United States of America. US Silver Eagles represent "honest money" and to
witness their continued manipulation is disheartening.

I am also sending this letter to other interested parties below to
inform them that another silver crime is in progress.